RIM, Motorola Put Patent Scuffle Behind Them

By Erika Morphy
Jun 11, 2010 11:42 AM PT

BlackBerry maker Research In Motion and Motorola have settled their two-year-long patent dispute over smartphone technology. Under the terms of the agreement, RIM has agreed to make a one-time payment and ongoing royalties to put an end to the litigation.

The two companies have also settled on a cross-licensing arrangement -- the focus of their original dispute in February 2008 -- on patent rights to a variety of industry standards and technologies, including 2G, 3G, 4G, 802.11 and wireless email. They will transfer certain patents to each other.

Other terms were not disclosed.

It has been a bruising battle for the two manufacturers, with litigation filed in four federal district courts, as well as a complaint to the International Trade Commission and countless proceedings at the U.S. Patent and Trademark Office. The two have also traded allegations of antitrust violations and breach of contract over the years.

Path Well Trod

That the two companies reached a settlement comes as no surprise. Most civil litigation settles out of court because of the costs involved, noted Christopher M. Collins, an attorney with Vanderpool, Frostick & Nishanian.

"This case has been fairly protracted, so depending on what the exact settlement terms are -- which we may never know -- it was probably the best path for both companies," he told the E-Commerce Times.

Another reason to opt for a private settlement, Collins added, is that one can wrangle additional terms or conditions out of the opposing party that a court could never order.

Patent Wars

Motorola and RIM's legal brawl was just one of several among smartphone manufacturers. Nokia and Apple are embroiled in a dispute, as are Apple and HTC.

It is the nature of the tech industry, Collins said. "When a technology is very new, there are few patents. The IP is protected by trade secrets or common law protections. Once an industry moves out from the bleeding edge, though, the patents are filed. Then, as the industry stabilizes and matures, the players try to protect market share, and that is when the patent disputes come out."

Market Conditions

Having settled their case, RIM and Motorola are now free to focus on their respective positions in the market, which have shifted significantly since their dispute began. Then, RIM was flying high, and Motorola's prospects were very uncertain.

Motorola's "hardware desperately needed a big refresh and so did its software," Azita Arvani of the Arvani Group told the E-Commerce Times. Initially, Motorola decided to refresh its operating system by betting on Android and Windows Mobile -- now Windows Phone, she said. "But when they saw Android's horse racing off to the horizon, they started focusing completely on Android."

That bet -- along with Motorola Co-CEO Sanjay Jha's background in Qualcomm and his good relations with Verizon and Google's Android team -- paid off handsomely, added Arvani, as the company aggressively developed several Android phones, including the Motorola Droid, in rapid succession.

Having revived itself from the brink of death, Motorola is now facing fierce competition from HTC and potentially other smartphone vendors that are also betting on Android, Arvani added. "So, they have to find ways to differentiate themselves in order to build on the small momentum they have gathered."

RIM is exiting this patent suit with a solid position in the market -- but concerns are mounting that it is not doing enough to stay competitive with Apple and Google.

RIM is the No. 2 smartphone vendor in the
global market, behind market-leader Nokia, according to IDC. Motorola is No. 5.

However, that same survey revealed that RIM is the vendor hurt most by Apple's growth. The iPhone accounted for 16.1 percent of Q1 shipments -- an increase from 10.9 percent a year earlier in the same period. RIM, by contrast, dropped from 20.9 percent to 19.4 percent.

RIM seems to have become complacent with its success, Arvani said. "For the longest time, they did not have a modern -- webkit-based -- browser. Their BlackBerry App World is way behind iPhone App Store and Android Market."

RIM is making strides to correct this. The company recently released a sneak peek of its upcoming new operating system -- which has a webkit-based browser, Flash and HTML 5 support, and social networking features. It is
scheduled for release in the third quarter of this year.